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PAY RESEARCH BUREAU (under the aegis of the Prime Minister's Office)
PAY RESEARCH BUREAU>Pay Considerations and Strategy

Pay Considerations and Strategy


7.1 The challenge of this review is to simultaneously redress the weaknesses of the present pay system, address the human resource requirements of the day, come up with a pay system and levels that are internally aligned and externally competitive with means that the country can afford and are acceptable in this environment of high expectations. In this chapter, we analyse the salient features of the existing pay structures, their appropriateness and weaknesses in terms of, inter alia, their internal alignment and external competitiveness, highlight the major considerations - including the economic factors, foreign experience and representations received, and formulate our strategies for pay determination.
External Relativities and Market Realities
7.2 In the process of determining public sector pay, it is essential to make an assessment of the general climate of pay in the country and to take account of market realities to ensure the external competitiveness of the pay structures. To that end, a survey on remuneration in the private sector and public enterprises not reported upon by the Bureau was carried out in collaboration with the Central Statistics Office. The survey has revealed that there exists no formally established link in pay between the public sector and the private sector though broad comparisons are often made by both groups in different forums. It confirms that the salaries paid to public sector employees differ considerably from those paid to their private sector counterparts for the same job.
7.3 At the upper echelon, the pay of employees in the private sector leads pay of corresponding or comparable positions in the public sector by far. There are also wide gaps in the benefits and other perks that are provided. At the middle management levels, though graduates and professionals in the private sector, at the initial stage of their career, may draw lower salaries than their counterparts in the public sector, however, after a few years of experience, their absolute levels of pay generally catch up with and exceed pay levels in the public sector.
7.4 On the other hand, at the lower level, the public sector has generally a pay lead over the private sector. The lead is more pronounced when comparison is made with minimum wages set by the National Remuneration Board (NRB) as these are determined on an industry-by-industry and occupation-by-occupation basis and, in principle, benchmarked on the survival of the least economic firm. The lead, however, narrows when comparison is made with pay in the inter-quartile range of the private sector.

Foreign Experience
7.5 Research indicates that the situation in the Mauritian Civil Service has been fairly prevalent in several Commonwealth countries though indications are that this is rapidly changing. In Singapore, for instance, salaries in Government have been benchmarked on the salaries in the private sector. In the United Kingdom (UK), the Government considers that Senior Civil Service (SCS) pay is ‘market-facing’ i.e. competitive to the extent that pay is not a barrier to recruitment and puts greater weight on public rather than private sector comparators, arguing that it is the nature of the job and not remuneration which attracts private sector candidates to seek SCS jobs. In India, according to the fifth Central Pay Commission Report, public sector salaries are pegged “at a level lower than the private sector, so as to encourage only public-spirited persons to choose Government service as a career”.
Representations
7.6 Strong arguments have been put in favour of a living wage by the staff side for an acceptable living standard without having to undertake more than one job. The argument rests on the premise that government, as a model employer, should be a pacesetter on grounds of social policy. On the other hand, certain officials argue that there are serious imbalances in the pay at the lower level between the public sector and the private sector, with the result that there is a relative oversupply of job seekers in the public sector, attracted by the higher pay for low-skill jobs when compared to the private sector. These officials consider it paradoxical that, while a new course has been charted to promote employment elsewhere outside the public sector, these imbalances in pay may exert still greater pressure for job opportunities in the public sector. On the other hand, strong arguments are put forward for large pay increases for professionals and for the higher echelon, based on comparators elsewhere.
7.7 Though we concur with the UK approach that Civil Service pay ranges are market facing and competitive to the extent that they are not a barrier to recruitment, we hold the view that some relative parities between public sector and private sector pay, need to be established though we do not accept the plea for a complete parity. There is definitely no case to align the remuneration system prevailing in the private sector in its entirety with the public sector as there are vital differences between the two sectors. Security of tenure of office in the public sector is a distinct advantage compared to the private sector. Similarly, unlike the public sector, profitability consideration in the private sector continues to be the prime driving force and is evidently a strong determinant for higher remuneration. Moreover, employees’ compensation (pay and perks) in the private sector remains within a non-transparent and opaque setting.

7.8 It, therefore, makes economic sense to partly bridge the gap where the private sector leads and allowing the private sector to further catch up at levels where public sector pay exceeds market rates. Caution should, however, be exercised as regards the extent to which these gaps should be bridged, both from the perspective of acceptability and affordability.
Equitable Internal Relativities Based on Job Evaluation
7.9 For effectiveness, the public sector pay structures have also to be appropriately aligned internally. Internal alignment, often called internal equity, refers to the pay relationships among different jobs/skills/competencies within the public sector.
7.10 Internal alignment is established through a sequence of techniques of job evaluation that starts with the analysis of the work done and the skills/
competencies required to do it. A structure is considered aligned if it supports the organisation strategy, fits the work flow, is fair to employees, and motivates their behaviour towards organisation objectives.
7.11 Moreover, with reforms taking place across the public sector, the working patterns, i.e. the effective days and hours of work, and the types of work and work processes, development strategies, programmes as well as systems and new technologies, have a bearing on job content.
7.12 Though the pay structures put in place in 2003 were ‘felt fair’ based on job evaluation, it has now been reported that, in a few areas, the narrow differentials between the grades in the hierarchies have had an adverse effect on the motivation of employees for promotional positions. While we hold the view that job evaluation should continue to be used to determine the relative worth of jobs, we are conscious of the fact that the size of differentials at certain levels needs to be revisited.
Compression of Pay Differentials – A Weakness of the Present Salary Ratio
7.13 The compression of pay differentials, i.e. too little difference in salary between levels due mainly to the initial salary ratio set and the policy of tapering increases for cost of living compensation adopted over the years has also been damaging to the public sector as adequate differential is not only a recognition of and a reward for increased responsibilities, but is also a major incentive for promotion. A gradual reduction of pay differentials is viewed as a systematic devaluation of the worth of a job with de-motivational effect on the employee. The pre-tax Permanent Secretary/General Worker ratio, which was set at 7.4:1 in 2003, has dropped to 6.6:1 today. The post-tax ratio, which works out to 7.3:1 in 2003, stands at 6.2:1 in 2008. Such a ratio is considered low by international standards.
7.14 In view of the importance of the size of differentials required for effectiveness and the number of levels required for operational delivery, the ratio between the entry level in the internal pay structure and the highest level should be sufficiently large to enable the design of an internally aligned and equitable pay structure.
Career Path Differentials – Another Weakness of the Present Salary Ratio
7.15 Career path differentials represent pay differences available for promotion from one level in the structure to the next. Promotion is one of the most effective methods of rewarding good performance and is accompanied by a minimum salary increase, reported as being in the 8% to 12% range internationally. In the UK, the Senior Civil Service (SCS) operates a system whereby a civil servant receives an increase of at least 10% on promotion and it is believed that increases of that order are usual at senior levels in other sectors.
7.16 In the existing pay structure, promotion from one grade to another is generally marked by an increase in salary equivalent to three increments, subject to the maximum salary of the promotional grade. However, in certain instances, given the excessive number of levels in the hierarchy, the increase is limited to only two increments. In such cases, the increase, in the existing salary structure, is around 6% only. There have been a number of representations about the small increases in remuneration on promotion as many officers consider that the pay increases from one grade to another do not appropriately recognise the increase in job weight and span of control. They argue that there should be a significant increase in base pay on promotion from one rank to another to reflect the substantial increase in responsibility.
7.17 We concur that the issue of pay on promotion is one of motivational concern and should be addressed.
Annual Increment and Performance Related Reward
7.18 The annual increments in pay scales provide managers the opportunity to recognise and reward individual performance and also meet employees’ expectations that, if they perform well, their pay will increase over time. Hence, the notion that increments have to be earned. However, there is virtually no evidence to indicate to what extent this notion has really been enforced. The grant of yearly increment has become almost automatic.
7.19 Rewards linked to performance were recommended in the 2003 PRB Report on the basis that a Performance Management Scheme would become operational. However, as the scheme has not yet been put in place across the Public Service, it has not been possible to implement the recommendation in respect of performance related pay. The result, today, is that the reward granted to both poor performers and high performers is the same.
7.20 There is, therefore, some dissatisfaction and demotivation among high performing employees as their commitment and outstanding performance are not being adequately recognised and rewarded. Officers irrespective of performance get the same treatment in terms of pay and in several instances promotion.
7.21 A reward system that recognises team and individual employees, who make truly extraordinary contributions well beyond the call of duty and participate in the implementation of new ideas/projects, would motivate and spur employees to greater and more significant contributions. However, care needs to be taken to ensure that team spirit is not jeopardised in the process.

The Total Remuneration Package in the Mauritian Public Service

7.22 As highlighted in the 2003 PRB Report, the present reward system in the public sector comprises a basic pay (determined through job evaluation) and other financial and non-financial rewards.
7.23 There is the tendency among employees, while effecting external comparison, to take account of only the basic pay. This is totally incorrect. A more pertinent comparison would be the total remuneration package including pay and other benefits such as leave, overseas travel, duty remission on cars and various other allowances.
7.24 Moreover, public sector employees have a highly secured tenure of employment and generally hold positions in a career structure with the possibility of climbing the hierarchical ladder on satisfying established criteria. Possibility of upward lateral movement and capacity building also exists.
7.25 All the above mentioned elements form the total remuneration package of the public service employee, and need be considered in a major salary review.
7.26 For this review, a strong case has been made for the trade-off of part of the benefits for a better and cleaner pay, nearer to market realities. However, we hold the view that both affordability and social acceptability considerations set limits on the extent of trade-off of part of benefits for a cleaner pay.
Pertinent Organisational Issues
7.27 Other current personnel and organisational issues identified as being increasingly problematic or relevant to efficient public sector management and which again need consideration in this review include recruitment, turnover and retention, and the high cost of acquisition of certain skills.

Recruitment and Retention of Skills in Short Supply
7.28 The critical skill shortage problem among certain categories of professionals is still present in certain areas of the public sector. This has been attributed to several factors such as (a) the unavailability of suitably qualified candidates particularly in the fields of science and technology e.g. medical specialists in certain domains as the costs of acquisition of such skills are exorbitant, not to say prohibitive; (b) the comparatively better pay packages offered or opportunities for higher earnings in respect of certain skills in the private sector; (c) the international demand for certain locally trained staff e.g. in the paramedical fields; (d) the opening of the market for certain skills that has led some of the more talented people to move to other countries thus leaving gaps at the domestic level; and (e) the high turnover rates of overqualified recruits.
7.29 As a result, certain areas are facing recruitment problems and/or high turnover rates. These issues are dealt with more elaborately at Chapter 4 on “Recruitment and Retention in the Public Sector”.
Costs of Acquisition of Qualifications, Skills and Competencies
7.30 The costs involved in the acquisition of qualifications, skills and competencies continue to be a pertinent issue. The inputs required and the sacrifices involved in getting through an examination, in learning a trade and in acquiring a professional qualification or a competency differ largely and depend on numerous factors like the field and venue of study, the stage or level or the degree of specialisation. Evidently, the longer the length of training/study, the higher the cost of inputs involved, the greater the effort required and the shorter the professional career.
7.31 In spite of the numerous courses run by the University of Mauritius, the University of Technology and other local vocational training institutions, a few disciplines e.g. Architecture, Quantity Surveying, Medical Specialities, Marine Engineering still require formal overseas study and training at very high costs. The inputs involved for acquiring professional qualifications abroad are significant.
7.32 We consider that the aspiration of individuals for their remuneration to be seen as a fair return for their investment on study and training or for their skill and competency is very legitimate, and this has been taken into account.
Pertinent Issues on Conditions of Service
7.33 In line with Government policy and to induce desirable behaviour in the context of fundamental reforms being undertaken, certain conditions of service e.g. pensions and duty free facilities are being restructured. Any current provisions that have been foregone have been quantified and taken into account in arriving at the salaries recommended for the different grades.

Other Considerations
Emphasis on Science and Technology
7.34 There are still imbalances in the stock of skills, with a mismatch between educational qualifications and the needs of the economy. Today, more and more students are taking non-science subjects for higher studies. Consequently, in certain fields of advanced science, it is becoming difficult to recruit professionals due to the unavailability or limited number of suitably qualified candidates on the local labour market resulting very often in non-response to public advertisements. The problem is of supply as for years the majority of students have not been opting for science subjects at secondary level. Aware of this mismatch, Government has undertaken a comprehensive review of the curriculum at primary and secondary levels in the light of developments world-wide and our national needs. A major boost at all levels is being given to the teaching of science and technology so that Mauritians can participate fully in a knowledge-based economy and in research and development programmes in the agro-industrial, pharmaceutical and other sectors. In that context, there is a case for a reward strategy to improve the prospects of advanced scientific positions both in terms of career and earnings.
Compensation for Erosion of Purchasing Power
7.35 Tapering increases are granted annually for compensation in the rise of cost of living. As a result of such increases, the loss in purchasing power has been more acute for officers in the higher pay brackets than for those in the lower pay brackets.
7.36 The erosion of purchasing power, as measured by the difference between the cumulative rate of inflation and the cumulative rate of compensation, is estimated to reach more than 30% by June 2008. However, as the compensation for rise in cost of living is not granted at a uniform rate across the board, the loss of purchasing power would be around 20% at the lower level and progressively higher to reach nearly 39% at the top of the echelon.
7.37 Given the levels of pay in general in the public sector, it is considered fair and reasonable that this loss should, subject to availability of funds, commensurate productivity and market realities be restored to the extent possible in the medium term. The loss of purchasing power for the period July 2003 to June 2008 has, therefore, been a major consideration in this review.
Need or Otherwise for Some Devolution
7.38 Views have also been expressed that determination of pay and conditions of service is too centralised and the present salary structure too rigid. The system does not allow for devolution of pay determination to Chief Executives nor is there flexibility in its application. It is, therefore, argued that the status quo is not conducive to the proper delivery of the mandate of public sector organisations and consequently to economic development. On the other hand, our experience with devolution has not been very satisfactory and in certain instances has even disturbed the industrial climate.There is need, therefore, to exercise caution in treading on the path of pay devolution.
Unions’ Claims
7.39 We have also, in the context of this review, examined the claims of the unions. The salient ones are highlighted hereunder.
7.40 The unions have asked for a living wage for the General Worker to enable only one wage earner to cater for all his family needs without having to engage in a second occupation, a general increase in pay levels and related allowances and improvement in conditions of employment. In general, the Federations of Unions would wish for maintenance of narrow differentials, while simultaneously claiming large pay increases for the professionals and senior civil servants – an impossible task!
7.41 Moreover, senior civil servants are claiming for major pay increases. By way of examples, the Association of Public Administrators has proposed that the present salary ratio of 1:7.4 between the top salary of the General Worker and the Permanent Secretary be reviewed to 1:12. The Mauritius Magistrates’ Association, has on its part, submitted that the salary of its members be increased significantly to a level which is equal to what they could earn in the private sector or certain institutions in the wider public sector to avoid further depletion within the service and shortage of Judicial Officers. The Medical Officers’ Unions and the Government Medical Consultants’ Association have made a plea for increases ranging between 50% and 100%. Professionals, in general, have made a plea for alignment on the market.
7.42 The grant of all the requests of the unions would cost the exchequer several billion rupees and consequently, unaffordable and unsustainable. On the other hand, experience shows that too large increases at the higher level though warranted from the market stance and economically sustainable are not easily acceptable.
Conclusions
Reward Principles
7.43 Against this background, the underlying principles overriding the pay review have been to:
Ø link pay with economic performance and productivity to the extent possible while ensuring acceptability and affordability
Ø establish evaluated relativities anew that will, where desirable, reflect market realities in the pay structure and reduce pay compression in the public sector
Ø set pay at levels to facilitate the recruitment, retention and motivation of staff with the required attributes, competencies and attitudes while at the same time targeting scarce skills and attracting new talents and inducing the return home of our elites from abroad
Ø promote the continual employability and upgrading of personnel through appropriate training and development programmes
Ø facilitate organisations in achieving their mandates and in service delivery with excellence through revised strategies and reforms
Reward Strategy
7.44 The reward strategy has, therefore, been crafted to guarantee the following:
(a) public sector compensation as a share of GDP is kept within the range of acceptability and affordability, say, 7 to 7.5%;
(b) compensation for erosion of purchasing power for the period between July 2003 to June 2008 effected over a period of, say, two years;
(c) trade off of the non-contributory pension scheme and some related rights concerning retirement age for a higher pay;
(d) the gap between public sector and private sector pay, where the latter sector has a significant lead, be partially bridged to facilitate recruitment and retention of required talents;
(e) downward extension of certain existing salary scales to match market rates thus reducing future recruitment costs while not affecting employees in post;
(f) provision of the possibility to reward excellence in performance through results based and performance related schemes for organisations that would have successfully implemented Performance Management, Programme Based Budget or ISO Standards; and for individuals who would perform well beyond the call of duty; and
(g) provision of an element of flexible pay and perks to cater for areas facing problems of a temporary nature, e.g. shortage of certain talents.
7.45 In short, to respond to the different challenges, we are, in this Report, decompressing the pay structures; re-determining the relative worth of jobs based on new qualifications, skills, competencies and job content; increasing the size of differentials; allowing the private sector to narrow the gaps at the lower levels; bridging the gap with the private sector to a desirable extent at levels where public sector pay is not competitive; compensating for erosion of purchasing power to the extent possible; and coming up with a pay system and levels that are internally aligned and externally competitive.
In reviewing the reward system, an Integrated Reward Strategy has been adopted as employee benefits (including pay, bonuses, and other conditions of service) are looked at from a total reward angle. Provision has been made for some form of Performance Based Pay for implementation at a future date but for immediate implementation for organisations that are ready. As for the last review, the constituent elements of the Total Reward Package have also been examined individually in details to establish, wherever possible and desirable, appropriate links between rewards and desirable behaviours and attitudes for improved performance.